Making money in the video game
business is usually a pretty simple proposition: you make a game; other
people pay to play it. There may be some middlemen like producers and
retailers in there, and the actual payment could be a purchase, subscription
or rental, but when you boil it down, the pay-to-play model has defined
the business of video games since the days of the arcade.

But the world of free-to-play
browser-based Flash and Java games has largely thrown this business
arrangement on its head. This is partly because it had to. People have
been trained by sites like Hotmail and Google to expect web services
-- even good ones -- to be free to use. The New York Times recently
abandoned its Times Select online subscription service, possibly after realizing that people
weren't willing to pay good money for the kinds of opinions that were
available for free on hundreds of blogs. Similarly, any online game
site that starts charging money for content risks losing players to
the myriad free alternatives.

Do Ads Work?

Like most other producers of
free web content, Flash developers are increasingly looking to ads to
monetize their games. It's a tough balancing act, though, because it
doesn't take much overt marketing to turn off a potential player. "Waiting
through even a 15 second pre-loader ad is really annoying," says
Jim Greer, CEO of Flash game aggregator Kongregate. "It means if
you send the link to your friend, your friend's going to be annoyed
because he's waiting through this ad. It's significant." For this
reason, Greer says, Kongregate only shows ads outside the actual gameplay,
on a small sidebar.

Others don't think putting
a short message before a web game is a major inconvenience. "Pre-loader
ads are nothing new," says Jameson Hsu, CEO of MochiAds, an ad
network that provides interstitial ads that run at the beginning and
in the middle of independent Flash games. "We're not adding anything
artificial into the ecosystem. These types of things have been around
for a long time -- people have put their logos, which are basically
ads, at the beginning of the game, during the pre-loader. When we created
MochiAds, we looked at it and said, 'Is this going to offend people?'
After surveying the market, we realized this is already happening. People
are already used to it."

MochiAds' system has a leg
up on portal sites like Kongregate, Hsu claims, because their ads will
stay with the game no matter how many sites it eventually ends up on.
"Advertisers are trying to come to terms with how content is spreading
on the web," Hsu says. "More and more we're in a fragmented
market. Not everybody's gonna visit major portals anymore -- it's not
about Yahoo or MSN or AOL. We're moving beyond the walled garden and
people are spreading out to MySpace and Facebook -- everybody has their
sort of niche sites. As these things spread, content spreads. We're
trying to educate advertisers that it's not so much about the site they
reach, but the people they reach."

This diffuse, multi-site advertising
strategy is working well for many Flash developers, Hsu says, with some
making thousands of dollars a month from MochiAds. "We're already
seeing people make a full time job of making games and using MochiAds
as their main source of income. It's very inspiring for us to get emails
saying, 'Hey, I quit my job and I'm making games full time,' and we
see from the revenues they're definitely able to do that. The beautiful
thing is, not only are they getting ad income now but they're seeing
more opportunities, licensing deals, development contracts... a lot
of doors open up once these guys are able to devote more time to it,
and that's what we're trying to do, help these guys step up and do something
they really believe in."